CENTRAL FLORIDA HOTEL MARKET ORLANDO’S … › file › 152005674.pdf · CENTRAL FLORIDA HOTEL...

HVS.com HVS Miami |8925 SW 148th Street, Suite 216 |Miami, Florida, USA 33176

JULY 2015

CENTRAL FLORIDA HOTEL MARKET

ORLANDO’S TRANSFORMATION Donald C. Stephens Jr. Vice President Natalie Pierce Research Coordinator

CENTRAL FLORIDA HOTEL MARKET – ORLANDO’S TRANSFORMATION | PAGE 2

Orlando Holds a New Title

The city of Orlando has long been known as an iconic vacation destination, but can now officially boast

the title of “Most Visited Tourist Destination in the U.S.”, reporting over 62.3 million visitors in 2014, up

5.1% from 2013.1 With multiple factors driving Orlando’s appeal, it is important to discuss what is on the

horizon for the hospitality market in this Central Florida city.

What Are We Looking At?

As of July 2015, 118,442 hotels rooms spread among seven unique submarkets comprise the Metro Orlando hotel

market - Orlando North, Central, and South, International Drive, Lake Buena Vista, and Kissimmee’s East and West

submarkets. Due to the proximity to Orlando’s most popular attractions, the Lake Buena Vista and International

Drive submarkets account for 64% or 76,005 rooms of Metro Orlando’s inventory. The following graphs illustrate

room distribution throughout Orlando’s submarkets, and by product segment.

FIGURE 1: METRO ORLANDO HOTEL INVENTORY DISTRIBUTION

Strong Growth for Orlando Continues

Following a steady restabilization period since the economic downturn, Orlando’s hotel market is back on top.

Through the first half of 2015, all three indices, occupancy, average daily rate (ADR) and revenue per available

room (RevPAR) continue to demonstrate significant growth. Comparative to period ending June 2014, Orlando’s

current room inventory reflects a mere 1.7% increase, while demand (occupied room nights) increased 5.7%.

Orlando’s occupancy rate increased from 76.9% to 80.1%, representing a percentage change of 4.1% over the

1http://media.visitorlando.com/pressrelease/index.cfm/2015/4/9/Orlando-Becomes-First-Destination-To-Surpass-60-Million-

Visitors-Sets-New-Record-For-US-Tourism/

Source: STR, Visit Orlando Market Research and Insights Department

Note: 23,451 of the rooms included

in this census belong in Disney’s

room inventory (much of them in the

Lake Buena Vista submarket) but

Disney do not report their lodging

statistics to STR.


same six-month period in 2014 - surpassing an occupancy threshold for the first time since 1998, seventeen years

ago. Average rate grew 4.4%, and RevPAR ended the first half of the year up 8.7%.

At the May 2015 Central Florida Hotel Market Review presented by HVS in Orlando, annual metric estimates were

presented. Donald C. Stephens, Vice President of HVS Consulting & Valuation based in Orlando, indicated a RevPAR

growth estimate of 8.6%. Based on updated data presented in the following tables through June 2015, it would

appear projections are trending toward market levels.

FIGURE 2: METRO ORLANDO OCCUPANCY RATES

FIGURE 3: METRO ORLANDO AVERAGE DAILY RATES

FIGURE 4: METRO ORLANDO REVPAR

Rank Submarket 2010 2011 2012 2013 2014 % Chg. 2014 YTD 2015 YTD % Chg.

1 Lake Buena Vista 71.7 % 77.7 % 76.1 % 77.1 % 81.3 % 5.4% 84.3 % 86.4 % 2.5%

2 Orlando South 67.7 70.0 70.0 73.4 76.2 3.8% 79.6 82.1 3.1%

3 International Drive 65.6 69.4 70.6 71.5 74.5 4.2% 77.4 80.6 4.1%

4 Orlando Central 58.7 61.5 63.0 66.5 70.1 5.4% 74.1 77.6 4.7%

5 Kissimmee East 54.2 48.9 62.0 62.9 64.3 2.2% 68.0 71.7 5.5%

6 Orlando North 49.7 53.1 57.3 61.9 63.9 3.2% 67.9 72.0 6.1%

7 Kissimmee West 46.2 49.0 54.2 55.0 59.4 8.0% 63.0 69.2 9.9%

Metro Orlando 64.0 % 67.7 % 68.9 % 70.5 % 73.7 % 4.5% 76.9 80.1 4.1%


Year-to-Date through June 30, 2015

Note: Lodging statistics do not include Disney properties


1 Lake Buena Vista 100.70$ 100.33$ 103.65$ 114.98$ $120.62 4.9% $127.51 $130.95 2.7%


3 Orlando South 91.64 93.70 98.99 99.13 104.76 5.7% 110.60 116.18 5.0%

4 Orlando Central 68.74 73.50 76.00 77.50 84.43 8.9% 84.77 91.06 7.4%

5 Kissimmee East 74.97 72.98 74.96 77.29 82.06 6.2% 83.55 84.82 1.5%

6 Orlando North 68.03 70.02 70.72 71.76 76.01 5.9% 77.98 85.16 9.2%

7 Kissimmee West 52.70 55.26 65.44 62.25 62.97 1.2% 64.42 66.59 3.4%

Metro Orlando $90.68 $94.13 $96.99 $101.55 $107.26 5.6% $111.86 $116.76 4.4%





1 Lake Buena Vista 72.20$ 77.94$ 78.99$ 88.65$ $98.06 10.6% 107.54$ 113.10$ 5.2%


3 Orlando South 62.04 65.54 69.42 72.76 78.05 7.3% 88.07 95.39 8.3%

4 Orlando Central 40.35 45.19 47.28 51.54 59.19 14.8% 62.78 70.63 12.5%

5 Kissimmee East 40.63 42.97 47.23 48.62 52.76 8.5% 56.80 60.83 7.1%

6 Orlando North 33.81 37.18 40.47 44.42 48.57 9.3% 52.93 61.33 15.9%

7 Kissimmee West 24.35 27.10 34.67 34.24 37.40 9.2% 40.57 46.07 13.6%

Metro Orlando $58.02 $63.68 $66.77 $71.62 $79.01 10.3% $86.07 $93.52 8.7%





With all three indices pointing toward continued growth in 2015, we expect the next 6- to 12-month period to be

predominantly average rate-driven, as certain submarkets have yet to recover to their respective prior peaks,

specifically in terms of average rate. HVS expects the Metro Orlando market to enter unfamiliar territory by

breaching the $86 aggregate RevPAR level in 2015. HVS anticipates a continuance of strategic increases in average

rate yields in the broader market through 2015 and well into 2016, barring any unforeseen event. The Metro

Orlando market is poised for solid demand growth as occupancy levels are expected to well exceed the long-run

20-year average of 69.3%.

Orlando’s Appeal - Demand Generators

Within any given market, the demand for room nights stems from multiple factors, including airport activity,

convention and conference business, and attractions that promote leisure travel to the area. Orlando has no doubt

established itself as a destination powerhouse and continues to add to its appeal in all demand areas.

Orlando International Airport

As the second busiest airport in Florida, Orlando International

Airport (OIA) serviced over 35 million travelers in 2014 and

looks to increase that number this year with the addition of

Norwegian Air, LAN Peru, and Emirate Airlines non-stop flights.

In June of 2013, the Airport Authority announced a five-year

renovation plan for OIA that includes a $470-million people-

mover system expansion, a $90-million upgrade to the existing

people-mover system, new 3,500-space parking garage, a

$114-million upgrade to Airside 4 (used for U.S. Customs and

Border Protection inspection of international visitors) to

improve international traffic, and a new $18-million cell phone

waiting lot. The plan also calls for $120 million towards a proposed new $2.1 billion south terminal complex.

FIGURE 5: ORLANDO INTERNATIONAL AIRPORT STATISTICS

Rolling 12-Mo. Rolling 12-Mo.

Traffic Category 2013 2014 % Chg. 2014 YTD 2015 YTD % Chg. 2014 2015 % Chg.

Domestic 30,823,571 31,390,437 1.8% 13,361,478 14,265,941 6.8% 30,875,021 32,310,124 4.6%

International 3,945,374 4,324,175 9.6% 1,774,798 2,017,316 13.7% 4,007,774 4,566,867 14.0%

Total 34,768,945 35,714,612 2.7% 15,136,276 16,283,257 7.6% 34,882,795 36,876,991 5.7%

Year-to-Date through May

Source: Orlando International Airport


Early in 2015, OIA officials announced a string of new destinations, adding a potential 432,000+ seats per year

coming into the Orlando market. Domestic travel into OIA accounts for roughly 88% of deplanements, with the

remaining 12% representing international visitor travel.

FIGURE 6: ORLANDO INTERNATIONAL AIRPORT NEW DESTINATIONS

Orange County Convention Center

With over 2.5 million square feet of contiguous meeting space available, OCCC is the second largest convention

center in the United States. Located about 11 miles southwest of downtown Orlando on International Drive, OCCC

is easily accessible from all areas of Metro Orlando and is crucial to Central Florida’s economy, generating over

$1.9 billion in revenue each year. OCCC last experienced peak attendance in 2007, but in 2014, convention and

tradeshow attendance numbers reached an all-time high at almost 1.1 million. 2015 and beyond look to be

promising years as groups like the International Association of Amusement Parks & Attractions and the

International Builders’ Show have extended contracts for shows through 2025.

Orlando Theme Parks

As the United States’ most visited tourist destination, Orlando theme parks offer some of the best attactions in the

world. Walt Disney World tops the list, boasting four major theme parks and two water parks whose attendance

growth levels remain consistent

and buttress the industry when

other parks falter. Universal’s

Islands of Adventure showed no

growth from 2013 to 2014, but

Universal Studios posted double-

digit growth for the second year

in a row. And despite SeaWorld’s

second consecutive year of

negative growth, Orlando area

theme and water parks averaged

a 2.4% increase in attendance

from 2013 to 2014.

Source: Themed Entertainment Association

Source: Themed Entertainment Association, 2014

Source: Orlando International Airport


Transportation

In addition to Orlando International Airport’s multi-million dollar renovation plan, plans to improve Orlando’s

infamous Interstate 4 and the city’s new commuter rail system, SunRail, are underway.

Interstate 4 began a $2.3 billion makeover in February of this year. The I-4 Ultimate

Project includes the reconstruction of 21 miles of I-4 through two Central Florida

counties and has a scheduled completion date in early 2021, a 7-year project.

Additionally, the completion of the 61-mile SunRail commuter rail line, stretching

through four Central Florida counties on existing freight tracks, is less than two years

away. The 31-mile first phase serves 12 stations, with average speeds of about 45 mph, and

phase two will serve five more stations.

In May 2014, a Georgia-based technology company

was awarded the opportunity to lease right-of-ways

between the Orlando International Airport and the

Orange County Convention Center for a fixed-

guideway transportation system. This now clears the

way for work to begin on a $315 million, 40-mile first

phase of this system. Subsequent phases of the overall

$800 million project would connect to Lake Nona’s Medical City (located in the Orlando South submarket) and the

Walt Disney World area. The new system would also provide a much-needed alternative transportation mode for

the busy International Drive tourist corridor.

New Hotel Development

Orlando looks to hold onto the title of “Most Visited U.S. Tourist Destination” by updating, transforming, and

adding to its already remarkable inventory of attractions, cultural venues, sports facilities, as well as the

infrastructure that supports the area. The city’s constant competition with other destinations across the country is

driving the following projects to completion.

Within Metro Orlando’s seven submarkets, much of the demand for new hotels takes place downtown in the

Orlando Central submarket as well as in the tourist corridors, in International Drive and Lake Buena Vista.

Recent Hotel Openings

Over the past couple of years, the Greater Orlando hotel market witnessed seven properties enter various

submarkets, totaling 2,889 rooms or 2.4% of current inventory.

FIGURE 7: METRO ORLANDO RECENT HOTEL OPENINGS

Hotel Parent Company Submarket Class Open Date # of Rooms

Homewood Suites Airport Hilton Orlando South Upscale Feb-13 128

The Alfond Inn at Rollins Independent Orlando Central Upper Upscale Aug-13 112

aloft Orlando Downtown Starwood Orlando Central Upscale Oct-13 118

Holiday Inn Express & Suites UCF Area IHG Orlando Central Upper Midscale Dec-13 91

Cabana Bay Beach Resort at Universal Loews International Drive Upscale Apr-14 1,800

Four Seasons Resort Orlando Four Seasons Lake Buena Vista Luxury Aug-14 444

The Lodge jetBlue at OIA Pyramid Hotel Group Orlando South Upscale Mar-15 196

Source: STR and HVS


New Hotel Construction

There are currently 15 hotels under various stages of construction in the greater Metro Orlando area, some of which are high-profile developments including two, dual-branded Marriott hotel projects. Collectively containing 3,118 rooms, or 2.6% of the current room inventory, these properties will be introduced through late 2016. It should be noted that two projects have stalled; the element by Starwood at the Orlando Fashion Mall, and the Hyatt Place conversion in the Lake Buena Vista submarket. FIGURE 8: METRO ORLANDO NEW HOTEL DEVELOPMENT UNDER CONSTRUCTION

Proposed Hotel Development (currently in Final Planning or Initial Planning Stage)

According to the July 2015 STR Pipeline report coupled with HVS’s internal market intelligence, 21 hotels representing 4,521 rooms (or 3.8% of current inventory) are in various stages of planning, while some are in final planning and design. FIGURE 9: METRO ORLANDO PROPOSED HOTEL DEVELOPMENT


Courtyard by Marriott Orlando Grand Lakes Marriott Orlando South Upscale Q2 2015 128

Residence Inn by Marriott Orlando Downtown Marriott Orlando Central Upscale Q3 2015 138

Hampton Inn & Suites at SeaWorld Hilton International Drive Upper Midscale Q3 2015 105

Residence Inn by Marriott at Lake Nona Marriott Orlando South Upscale Q4 2015 102

Courtyard by Marriott at Lake Nona Marriott Orlando South Upscale Q4 2015 102

Fairfield Inn & Suites Kissimmee Marriott Kissimmee East Upper Midscale Q1 2016 150

Hampton Inn & Suites ORMC Hilton Orlando Central Upper Midscale Q1 2016 126

SpringHill Suites at Flamingo Crossing Marriott Lake Buena Vista Upscale Q1 2016 248

TownPlace Suites at Flamingo Crossing Marriott Lake Buena Vista Upper Midscale Q1 2016 250

Home2 Suites I-Drive South Hilton International Drive Upper Midscale Q2 2016 146

Fairfield Inn & Suites UCF Area Marriott Orlando Central Upper Midscale Q3 2016 112

Loews Sapphire Falls Resort Loews International Drive Upscale Q3 2016 1,000

Hyatt House I-Drive Hyatt International Drive Upscale Q4 2016 175

element at the Orlando Fashion Square Mall Starwood Orlando Central Upscale Q4 2016 167

Hyatt Place Lake Buena Vista Hyatt Lake Buena Vista Upscale Q4 2016 169


Proposed Hotel Projects - Final Planning

Residence Inn Universal Studios Marriott International Drive Upscale Q4 2016 195

TownePlace Suites I-Drive Marriott International Drive Upper Midscale Q4 2016 180

SpringHill Suites Lake Buena Vista Marriott Lake Buena Vista Upscale Q4 2016 175

TownePlace Suites Lake Buena Vista Marriott Lake Buena Vista Upper Midscale Q4 2016 175

Homewood Suites SeaWorld Hilton International Drive Upscale Q4 2016 133

Hilton Garden Inn I-Drive Hilton International Drive Upscale Q3 2017 200

Courtyard by Marriott Convention Center Marriott International Drive Upscale Q1 2018 180

ph Premiere Hotel and Spa Planet Hollywood Lake Buena Vista Luxury TBD 500

Proposed Hotel Projects - Initial Planning

Holiday Inn Express Lake Buena Vista IHG Lake Buena Vista Upper Midscale Q4 2016 125

Holiday Inn Express at Seaworld IHG International Drive Upper Midscale Q2 2017 180

Staybridge Suites I-Drive IHG International Drive Upscale Q2 2017 89

Residence Inn at Millenia Mall Marriott International Drive Upscale Q2 2017 128

AC Hotel by Marriott at Millenia Mall Marriott International Drive Upper Upscale Q2 2017 132

Residence Inn I-Drive Marriott International Drive Upscale Q1 2019 150

Action Sport & Entertainment Resort Hyatt Kissimmee East Upscale TBD 250

Home2 Suites Convention Center Hilton International Drive Upper Midscale TBD 170

Curio by Hilton at DPAC in the CBD Hilton Orlando Central Upper Upscale TBD 175

Proposed Downtown Orlando Hotel TBD Orlando Central Upscale TBD 180

Proposed Holiday Inn Express & Suites IHG Lake Buena Vista Upper Midscale TBD 125

Solis Hotel & Resort at iSquare Mall Solis International Drive Luxury TBD 729

Proposed Hotel at Skyplex TBD International Drive Upscale TBD 350

Source: STR Pipeline Report dated July 2015 and HVS



FIGURE 10: NEW DEVELOPMENT BY SUBMARKET

A New Concept to the Orlando Landscape: Dual-Branded Hotels

After a lag in development during the recession, the market is trying to play catch up to 1993-2003’s 3.4% annual room inventory growth rate. RevPAR levels in Metro Orlando have experienced significant growth since 2009, promoting a stable setting for developers to once again begin the development cycle. The “most visited tourist destination” is preparing for continued demand, indicated by recently-opened properties as well as continued construction and planning through the end of the decade. This in itself establishes Orlando as a stable market, prepared to handle the demand of over 62 million visitors a year. However, this isn’t the only interesting news. The up-market cycle has brought a new trend to the Orlando market - that of dual-branded properties. The appeal of pairing two distinct, but compatible brands in one development not only allows for cost-saving activity on the construction and operations side, but attracts multiple target guest groups to one area. Of the developments currently under construction, two are dual-branded. One other proposed dual-branded property is progressing through the approval process. Lake Nona is located eight driving miles east of the Orlando International Airport and is home to the Lake Nona Medical City, which includes the University of Central Florida’s College of Medicine, Sanford Burnham Prebys Medical Discovery Institute, Nemours Children’s Hospital, and the $656 million VA Medical Center. The current stage of development includes more than $150 million worth of construction on the Lake Nona Town Center, a 452,120-square-foot project that includes 84,352-square-feet of office and retail space, a 600-space, 228,512-square-foot attached parking garage, and the first two hotels that will offer support to the community. Marriott’s Residence Inn and Courtyard by Marriott are the planned anchors of this development phase, offering seven stories, 139,256 square feet, and a combined 204 rooms. The Lake Nona Town Center is situated on 8.7 acres of the “Medical City” and is scheduled for completion this summer. Currently, the closest lodging options are located over six miles away, north of the Orlando International Airport.

Submarket

Recent

Openings

New

Construction

Final

Planning

Initial

Planning Total % of Total % of Market

Orlando North 0 0 0 0 0 0.0% 0.0%

Orlando Central 321 543 0 355 1,219 11.6% 1.0%

Orlando South 324 332 0 0 656 6.2% 0.6%

International Drive 1,800 1,426 888 1,928 6,042 57.4% 5.1%

Lake Buena Vista 444 667 850 250 2,211 21.0% 1.9%

Kissimmee West 0 0 0 0 0 0.0% 0.0%

Kissimmee East 0 150 0 250 400 3.8% 0.3%


Aerial view of Lake Nona’s dual-branded Residence Inn and Courtyard by Marriott


Flamingo Crossings is a hotel and retail development project located at the western edge of Walt Disney World property aimed at budget-conscious Disney visitors and athletes attending events at Disney ESPN’s Wide World of Sports complex. After five years of delays, construction on Disney’s Flamingo Crossings has begun, marked by the groundbreaking of two Marriott-branded hotels in October of 2014. Marriott’s TownePlace Suites and Springhill Suites will have 498 suites between them, the first of 5,000 planned hotels rooms at the Flamingo Crossings development, and are slated to open in early 2016. In addition, the dual-branded property will share a recreational area featuring two batting cages, a basketball court, and a multi-purpose field to cater to the sports-tourism market.

The Mall at Millenia is a 1.2-million square-foot, upscale shopping mall that opened in 2002 and is located six miles southwest of downtown Orlando. Despite the decline in popularity of many U.S. malls, The Mall at Millenia ranked 7

th on Fortune’s 2014 list of malls that “Make the most”, distinguishing itself with dramatic architecture, national

anchor tenants, and 150 of the world’s finest stores, services, and upscale restaurants. The continued success has prompted Puerto Rico-based developer Island Hospitality Partners, LLC to plan for a dual-branded Marriott property on a 4-acre site just west of the shopping center. The property will be a 254-room Marriott AC Hotel and Residence Inn. Marriott’s AC Hotel concept, developed in 1998 yet new to the Orlando area, is described as European boutique and tailor-made for the modern traveler. Meanwhile, the more recognized Residence Inn by Marriott will attract both business and leisure travelers staying for an extended period of time. The developer is advancing through the approval process and construction is tentatively set to begin in the first quarter of 2016.

Proposed Site AC Hotel/Residence Inn

Aerial view of Flamingo Crossing Marriott’s dual-branded TownePlace Suites and Springhill Suites Walt Disney World in the background

Aerial view of the Mall at Millenia

HVS.com HVS Miami |8925 SW 148th Street, Suite 216 |Miami, Florida, USA 33176

About HVS

HVS, the world’s leading consulting and services organization

focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries, celebrates its 35th anniversary this year. Established in 1980, the company performs 4,500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 35 offices and more than 450 professionals, HVS provides an unparalleled range of

complementary services for the hospitality industry. HVS.com

Superior Results through Unrivaled Hospitality Intelligence. Everywhere.

HVS MIAMI, with office locations in both Miami and Orlando, provides a variety of consulting and valuation services for hotels, mixed-use real estate, and shared ownership projects. Florida-based professionals with HVS have completed over 1,500 engagements, with over 50% located throughout the state of Florida. They have also worked in 28 Caribbean islands and 12 Central and South American countries. In addition to certified valuations which are overseen by three MAI designated appraisers, the HVS team in Florida also provides feasibility studies, acquisition due diligence, asset management, expert witness testimony, and marketing and sales solutions for mixed-use and shared ownership real estate developments.

For more information, go to:

http://www.hvs.com/Offices/Miami/

About the Authors

Donald C. Stephens, Jr. is Vice

President overseeing Central

Florida consulting and valuation

services of the firm. Donald is

located at One Orlando Centre in

the Orlando’s downtown CBD and

has a range of geographical

experience, having appraised

properties in 18 states, the

Caribbean, and Eastern Canada. Donald has been an active

participant in the hotel industry for over 30 years as a real

estate consultant and senior appraiser. Donald has been an

Associate Member of the Appraisal Institute since 2004 and

entered into the Candidate for Designation program in

2013. Donald is a Partner Member of Visit Orlando, and an

Allied Member of Central Florida Hotel & Lodging

Association. Donald is a Past Member of the Palm Beach

County Hotel & Lodging Association and a Past Executive

Member of the Appraisal Institute of Canada, Nova Scotia

Chapter.

For further information, please contact:

[email protected] | (407) 203-1122 | (407) 405-4363

Natalie Pierce is a Research

Coordinator with HVS Consulting &

Valuation based in the Orlando

office. Natalie holds a BS (Honors)

in Hospitality Management from

the Rosen College of Hospitality

Management at the University of

Central Florida. She joined HVS in

May of 2015 after gaining

experience in Front-of-House roles with White Lodging,

Hyatt Hotel Corporation, and Levy Restaurants. Before

taking a year-long hiatus to teach English in Niigata, Japan,

Natalie developed a strong understanding of hotel and food

& beverage operations. This, combined with a deep

familiarity of the Central Florida market, has led her to

assist with recent feasibility and market studies throughout

Central Florida.

http://www.hvs.com/Offices/Miami/

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